Evelyn Reynolds

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    Key Fed inflation gauge at 2.2% in August, lower than expected

    The PCE price index, a measure the Fed focuses on to measure the cost of goods and services in the U.S. economy, rose 0.1% for the month, putting the 12-month inflation rate at 2.2%.
    Excluding food and energy, core PCE rose 0.1% in August and was up 2.7% from a year ago.
    The all-items inflation gauge was below Wall Street estimates and the lowest since early 2021.

    Inflation moved closer to the Federal Reserve’s target in August, easing the way for future interest rate cuts, the Commerce Department reported Friday.
    The personal consumption expenditures price index, a gauge the Fed focuses on to measure the cost of goods and services in the U.S. economy, rose 0.1% for the month, putting the 12-month inflation rate at 2.2%, down from 2.5% in July and the lowest since February 2021. The Fed targets inflation at 2% annually.

    Economists surveyed by Dow Jones had been expecting all-items PCE to rise 0.1% on the month and 2.3% from a year ago.

    Excluding food and energy, core PCE rose 0.1% in August and was up 2.7% from a year ago, the 12-month number 0.1 percentage point higher than July. Fed officials tend to focus more on core as a better measure of long-run trends. The respective forecasts were for 0.2% and 2.7% on core.
    “All quiet on the inflation front,” said Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley. “Add today’s PCE Price Index to the list of economic data landing in a sweet spot. Inflation continues to keep its head down, and while economic growth may be slowing, there’s no indication it’s falling off a cliff.”
    Though the inflation numbers indicated continued progress, the personal spending and income numbers both came in light.
    Personal income increased 0.2% on the month while spending rose 0.2%. The respective estimates were for increases of 0.4% and 0.3%.

    Stock market futures were positive following the report while Treasury yields were negative.
    The readings come a little more than a week after the Fed took down its benchmark overnight borrowing rate by half a percentage point to a target range of 4.75%-5%.
    The progress in August came despite continued pressure from housing-related costs, which increased 0.5% on the month for the largest move since January. Services prices overall rose 0.2% while goods declined by 0.2%.
    It was the first time the central bank had eased since March 2020 in the early days of the Covid pandemic and was an unusually large action for a Fed that prefers to move rates in quarter-point increments.
    In recent days, Fed officials have switched their focus from inflation fighting to an emphasis on supporting a labor market that has shown some signs of softening. At their meeting last week, policymakers indicated a likelihood of another half percentage point in cuts this year then a full point in reductions for 2025, though markets expect a more aggressive path.

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    The Fed’s Preferred Inflation Gauge Cooled in August

    Inflation has been slowing for months, which has paved the way for Federal Reserve interest rates cuts.Inflation cooled in August, the latest sign of progress in the Federal Reserve’s yearslong fight to bring rapid price increases back under control.The Personal Consumption Expenditures index climbed by 2.2 percent from a year earlier, data released Friday showed. That is down from 2.5 percent in July and slightly softer than economist forecasts. It was the slowest annual inflation reading since early 2021.After stripping out volatile food and fuel prices for a better sense of the underlying inflation trend, a “core” price index was a bit more stubborn on an annual basis. The core measure came in at 2.7 percent, up from 2.6 percent previously and in line with what economists had expected. But comparing prices from month to month, core inflation slowed to a modest 0.1 percent in August.Altogether, the report offers further proof that price increases are swiftly fading. Already, that has allowed the Fed to begin to lower interest rates from a more than two-decade high of 5.3 percent. After raising borrowing costs sharply and then holding them at a high level to slow the economy and weigh down inflation, officials voted last week to cut rates by a larger-than-usual half percentage point. Policymakers also signaled that more rate cuts are coming, as long as inflation continues to fade.The Fed’s pivot is already helping to bring down mortgage rates, and it could slowly trickle through the economy to stop the job market from slowing more markedly. Central bankers are trying to pull off a rare “soft landing,” in which they cool conditions enough to wrangle price increases without tempering them so much that unemployment spikes and the economy falls into a recession.There were some signs that the economy may be pulling back — but not crashing — in the details of Friday’s report. Consumer spending, which makes up a big part of overall economic activity, grew more slowly in August, the data showed. And personal incomes picked up less than expected.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    As Strike Looms, Port Operators Ask Regulator to Force Dockworkers to Negotiate

    The group that represents port terminal operators said the International Longshoremen’s Association was refusing to negotiate a new contract before a Monday deadline.Days ahead of a possible strike by longshoremen on the East and Gulf Coasts, port employers said on Thursday that they were asking a federal labor regulator to force the dockworkers’ union to resume negotiating a new contract.The United States Maritime Alliance, which is made up of port terminal operators, said it had filed an “unfair labor practice” complaint at the National Labor Relations Board after, it said, the International Longshoremen’s Association repeatedly refused to negotiate. The alliance said it wanted the labor board to rule that the union must negotiate with the employers.In a statement on Thursday, Jim McNamara, an I.L.A. spokesman, called the charge a “publicity stunt” that illustrated that the port employers were “poor negotiating partners.”Last week, the union said the two sides had “communicated multiple times in recent weeks,” and it contended that a stalemate existed because the Maritime Alliance was offering “an unacceptable wage increase.”A strike could begin on Tuesday, after the current labor contract expires on Monday. The I.L.A. broke off talks in June, contending that it had discovered that an employer was using labor-saving technology at the port in Mobile, Ala., that it claimed was unauthorized under the current contract.A strike would close down nearly all activity at ports from Maine to Texas — including at the Port of New York and New Jersey, the third busiest in the country. Analysts say even a short walkout could deal a blow to the economy. Fearing a strike, importers have been bringing in goods before next week and diverting some shipments to West Coast ports.Officials in the Biden administration have said President Biden is not planning to force dockworkers back to work, which the 1947 Taft-Hartley Act authorizes him to do. But economists said Mr. Biden might well end up invoking the act if a strike dragged on.Under the expiring contract, longshoremen earn $39 an hour. A person familiar with the negotiations said the union was asking for a $5-an-hour raise in each year of the new contract, which would last for six years. The person said employers were offering annual raises of $2.50 an hour.The Maritime Alliance said Monday that it had been contacted by the Federal Mediation and Conciliation Service, a government agency that helps management and unions negotiate labor contracts.Federal labor law says it is unlawful for a labor organization to refuse to negotiate on behalf of its members. More

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    Trump’s Plans Could Spur Inflation While Slowing Growth, Study Finds

    A nonpartisan economic analysis warned that deporting migrants and increasing tariffs would damage the U.S. economy.Former President Donald J. Trump’s proposals to deport millions of migrants and impose new tariffs on imports from around the world would slash U.S. economic growth and employment and cause inflation to rebound sharply, according to a new analysis published on Thursday by the nonpartisan Peterson Institute for International Economics.That analysis also assumed that Mr. Trump would try to encroach on the independence of the Federal Reserve. He has not floated such a proposal but has suggested that presidents should have input into the central bank’s policies and in the past tried to publicly push the Fed to lower interest rates.The assessment of Mr. Trump’s policies was published days after the Republican presidential candidate pitched his plan to create a manufacturing “renaissance” in America by cutting corporate taxes and regulations and increasing tariffs by as much as 200 percent. Economists have been skeptical about the viability of many of Mr. Trump’s proposals, and some of them could be difficult to enact. But the new report argued that if taken together, the policies would inflict significant damage on the U.S. economy.“While Trump promises to ‘make the foreigners pay,’ our analysis shows his policies will end up making Americans pay the most,” Warwick J. McKibbin, Megan Hogan and Marcus Noland wrote in their report.The study from the Peterson Institute, which tends to favor free trade, examined the effects of three prominent parts of Mr. Trump’s agenda: deporting 8.3 million unauthorized migrants, levying 10 percent tariffs on all imports and 60 percent tariffs on imports from China, and eroding the Federal Reserve’s independence by allowing the president to influence interest rate policy.The study suggested that Mr. Trump wanted to weaken the Fed’s independence, citing a Wall Street Journal article that said his allies were drawing up a plan to blunt the central bank’s ability to freely set interest rates. It also noted that Mr. Trump has said he believes presidents should have a “say” on interest rate policy.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Harris Now Has an Economic Plan. Can It Best Trump’s Promises?

    A central question in the final stretch of the election is if Vice President Kamala Harris’s proposals will cohere into an economic argument that can top former President Donald J. Trump’s.Vice President Kamala Harris has a plan for the economy: a glossy, 82-page booklet detailing proposals on housing, taxes and health care that her campaign handed out to supporters gathered at a campaign event in Pittsburgh this week.Former President Donald J. Trump has nothing so detailed. The issues section of his campaign website is spare. He has coughed up a string of four- or five-word slogans promising tax cuts, some of which even his advisers cannot fully explain. He has toyed with a tariff as high as 20 percent on every good imported into the United States, promised to deport millions of immigrants to reduce the demand for housing and boasted that he can halve energy prices in a year.Even with such an improvisational, loosely defined agenda, he is still leading Ms. Harris on the economy in polls, though his advantage is shrinking in some surveys. Many economists have warned that Mr. Trump’s promises, if turned into concrete policy, could slow growth, raise consumer prices and balloon the federal deficit.But many voters find Mr. Trump’s punchy promises easy to grasp. His basic message of lower taxes, less regulation and less trade with other countries helped carry him to the White House once before. A majority of Americans fondly remember the economy in the first three years of his administration, before the pandemic and years of elevated inflation.A central question in the final stretch of the presidential race is if Ms. Harris’s more detailed — but in many cases still not fully formed — stack of policy proposals will cohere into an economic argument that can top that.To a remarkable degree in a deeply polarized country, Ms. Harris and Mr. Trump have many of the same stated goals for the economy. Lower costs. Reduce regulations. Cut taxes for the middle class. Incentivize corporations to build their products in the United States.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Swiss central bank cuts rates by a quarter point in third trim this year

    The Swiss National Bank on Thursday took a third step to loosen monetary policy this year, bringing its key interest rate down by 25 basis points to 1.0%.
    The reduction comes amid subdued domestic inflation and a rally in the Swiss franc.
    It was the first major Western central bank to reduce interest rates back in March.

    A view of the headquarters of the Swiss National Bank (SNB), before a press conference in Zurich, Switzerland, March 21, 2024. 
    Denis Balibouse | Reuters

    The Swiss National Bank on Thursday took a third step to loosen monetary policy this year, bringing its key interest rate down by 25 basis points to 1.0%.
    The trim, which had been anticipated by 30 of 32 analysts surveyed in a Reuters poll, marked the SNB’s third interest rate reduction of 2024.

    It was the first major Western central bank to reduce interest rates back in March.
    The third trim comes amid similar signals from the European Central Bank and the U.S. Federal Reserve, which took the long-awaited plunge to slim down its interest rates with a 50-basis-point cut last week. Domestically, Swiss inflation remains subdued, with the latest headline print pointing to a 1.1% annual increase in August.
    The Swiss franc gained ground against major currencies on the back of the latest interest rate decision. The U.S. dollar and euro were down nearly 0.14% and 0.16% against the Swiss coin, respectively — meeting ING analysts’ expectations that the cut would lead to “outperformance” of the Swiss currency.
    The strengthening of the Swiss currency in August prompted one of the country’s largest associations, the technology manufacturers’ group Swissmem to entreat the SNB to “act soon, in line with its mandate” and ease pressures constraining local businesses.
    “This renewed exacerbation has come at a sensitive time for one of the key export industries: following a tough period of over a year, a slow recovery was in sight. If the upside pressure cannot be contained, these hopes will dissipate,” Swissmem said at the time.

    The SNB acknowledged the broader trend of its currency rally as a key contributor to the Thursday reduction.
    “Inflationary pressure in Switzerland has again decreased significantly compared to the previous quarter. Among other things, this decrease reflects the appreciation of the Swiss franc over the last three months,” it said in a statement.
    “The SNB’s easing of monetary policy today takes the reduction in inflationary pressure into account. Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term,” it added.
    “The SNB has consistently been behind the curve on its inflation forecasts this year, even as it has conditioned them on lower rates each time. The 0.6% forecast for 2025 is likely a bit too close for comfort for a central bank keen to return to deflation,” said Kyle Chapman, FX markets analyst at Ballinger Group.
    “I expect another two 25bp moves in December and March at the very least, primarily because I don’t see any near-term sources of depreciation for the franc without a stronger stance on intervention from the SNB. We are heading back towards zero relatively quickly,” Chapman added. 
    SNB Chairman Thomas Jordan, who is leaving the central bank at the end of this month, talked down this risk on Thursday.
    “If you look at our inflation forecast, this is still within the range of price stability, so I cannot see any risk of deflation soon,” Jordan told reporters, according to Reuters. He added that the central bank may nevertheless have to reduce rates again to retain inflation in the 0-2% target range.
    Adrian Prettejohn, Europe economist at Capital Economics, said that the SNB communique suggested that the central bank’s policymakers have likely not used forex interventions “to a significant extent” — but may soon resort to such measures.
    “We think the SNB will start to consider using FX interventions significantly once the policy rate falls to around 0.5%. At that point it will be a more finely balanced decision as to how much to rely on currency intervention rather than further rate cuts to provide further monetary policy support,” Prettejohn said in a note. More

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    U.S. Economy Had Stronger Rebound From Pandemic, G.D.P. Data Shows

    Updated figures show that gross domestic product, adjusted for inflation, grew faster in 2021, 2022 and early 2023 than previously reported.The U.S. economy emerged from the pandemic even more quickly than previously reported, revised data from the federal government shows.The Commerce Department on Thursday released updated estimates of gross domestic product over the past five years, part of a longstanding annual process to incorporate data that isn’t available in time for the agency’s quarterly releases.The new estimates show that G.D.P., adjusted for inflation, grew faster in 2021, 2022 and early 2023 than initially believed. The revisions are relatively small in most quarters, but they suggest that the rebound from the pandemic — already among the fastest recoveries on record — was stronger and more consistent than earlier data showed.

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    Quarterly change in gross domestic product, adjusted for inflation
    Quarterly changes shown as seasonally adjusted annual ratesSource: Bureau of Economic AnalysisBy The New York TimesPerhaps most notably, the government now says G.D.P. grew slightly in the second quarter of 2022, rather than contracting as previously believed. As a result, government statistics no longer show the U.S. economy as experiencing two consecutive quarters of declining G.D.P. in early 2022 — a common definition of a recession, though not the one used in the United States. (The revised data still shows that G.D.P. declined in the first quarter of 2022, but more modestly than previously reported.)The official arbiter of recession in the United States is the National Bureau of Economic Research, a nonprofit research organization made up of academic economists. The group defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” and it bases its decisions on a variety of indicators including employment, income and spending.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Harris’s Economic Pitch: Capitalism for the Middle Class

    In a major address in Pittsburgh, the vice president praised business and used technical language to court economy-minded voters skeptical of big government.Vice President Kamala Harris wants voters to know that she is not a socialist.That was the clear, unspoken theme of Ms. Harris’s nearly 40-minute economic policy speech in Pittsburgh on Wednesday. It was why she paraphrased Warren Buffett, cited a survey of top economists and praised entrepreneurs in language that echoed Republican Senator Mitt Romney’s presidential run a dozen years earlier.Ms. Harris is locked in a tight presidential race with former President Donald J. Trump. Polls show that the economy remains the biggest issue in the race and that many undecided voters have concerns about Ms. Harris’s ability to make things better. Mr. Trump has tried to deride Ms. Harris as a socialist, if not a communist. Polls suggest those attacks have raised doubts in some swing voters’ minds about how Ms. Harris would wield government power to manage the economy.And so, in what was billed as a major economic address with only weeks to go in the campaign, Ms. Harris sought to put those doubts to rest. In muted and technical language that seemed designed to court on-the-fence voters skeptical of the government’s ability to solve major economic problems, Ms. Harris embraced capitalism and called herself a pragmatist who would not govern by ideology.In front of an audience filled with business owners and entrepreneurs at the Economic Club of Pittsburgh, Ms. Harris promised to build an economy that gains strength from a growing middle class, grounded in “fairness, dignity and opportunity.”“I promise you I will be pragmatic in my approach,” she said. “I will engage in what Franklin Roosevelt called bold, persistent experimentation. Because I believe we shouldn’t be constrained by ideology, and instead should seek practical solutions to problems, realistic assessments of what is working and what is not, applying metrics to our analysis, applying facts to our analysis and stay focused, then, not only on the crises at hand but on our big goals, on what’s best for America over the long term.”A moment later, she added: “Look, I am a capitalist.”Ms. Harris could have chosen a different path — one that many progressives have urged her to take. She could have more clearly delineated who she sees as the villains of the economy — namely big corporations.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More